Third District Court of Appeal Holds That an Agreement to Provide Water to a Casino Triggered the Unusual Circumstances Exception to the Small Projects Categorical Exemption and Finds Evidence the Project May Exacerbate the Environmental Consequences of a Drought

On October 4, 2012, the Third District Court of Appeal in Voices for Rural Living v. El Dorado Irrigation District (2012) ___ Cal.App.4th ___ (Case No. C064280), affirmed the trial court’s judgment voiding the El Dorado Irrigation District’s approval of an agreement to provide water to a casino on tribal land. The appellate court held the irrigation district’s approval of the agreement did not qualify for the small projects categorical exemption because the project triggered the unusual circumstances exception, and the record contained evidence upon which a fair argument could be made that the project could have significant environmental impacts during a drought. The appellate court reversed the judgment in part and directed the trial court to order the irrigation district to conduct further California Environmental Quality Act (CEQA) proceedings because the trial court should not have mandated the irrigation district to prepare an environmental impact report (EIR). 

In 1987, the Shingle Springs Band of Miwok Indians and the El Dorado Irrigation District entered an annexation agreement to bring 160 acres of tribal land into the district’s service area. In 1989, the El Dorado County Local Agency Formation Commission (LAFCO) conditioned its approval of the annexation by restricting the land to residential uses and authorizing the district to supply only enough water for 40 residential lots or less. Subsequently, the tribe proposed building a casino and hotel on the annexed land. After deciding that the LAFCO conditions were invalid, the irrigation district approved an agreement on May 28, 2008, to provide the tribe with more water than LAFCO had authorized. The district then issued a notice of exemption stating the project was categorically exempt under the class 3 exemption for new construction or conversion of small structures. Voices for Rural Living challenged the approval of the agreement and alleged violations of CEQA and the LAFCO Act. The trial court granted the petition for writ of mandate and ordered the district to set aside its approval and to prepare an EIR. The tribe and Voices for Rural Living appealed the trial court’s judgment, raising different arguments. 

The appellate court first reviewed the irrigation district’s determination that the project did not trigger the unusual circumstances exception to the class 3 categorical exemption. As a preliminary matter, the court applied the de novo standard of review and concluded the project did present unusual circumstances because providing water to a casino and hotel greatly differed from providing water to a single family residence, the type of project typically covered by the class 3 categorical exemption. 

Then the court applied the fair argument standard to the question of whether there is a reasonable possibility of a significant effect on the environment due to the unusual circumstances, despite acknowledging a split of authority as to whether the less deferential fair argument standard or the more deferential substantial evidence standard should be employed. The court found there was evidence in the record upon which a fair argument could be made that the project may exacerbate the environmental consequences of a drought. The court noted that the irrigation district had failed to consider the effect of climate change on possible shortages during a drought. Additionally, the court found the record lacked sufficient information regarding how the irrigation district would, during a drought, be able to meet its customer demands as well as new in-stream flow requirements, imposed by the Federal Energy Regulatory Commission on a portion of the American River from which the district is entitled to receive water. 

Finally, the court held the irrigation district must comply with the LAFCO conditions because the irrigation district was not vested by the California Constitution or by statute with the authority to determine the validity or constitutionality of LAFCO’s annexation conditions. The court explained that even if the LAFCO conditions were unconstitutional and preempted by federal law, they must be deemed valid and binding until a proper court of law enjoins their enforcement.  (Elizabeth Sarine)